Global Policy Forum

The “Chinese Tsunami� that Threatens to Swamp Africa


By Basildon Peta

April 25, 2005

When Lisebo Tsebo's Chinese employers abruptly shut their textiles factory and vanished without paying their workers, she tried to commit suicide by drinking a mixture of insecticide and rat poison. She was among nearly 10,000 workers who have lost their jobs in six factory closures in Lesotho over four months, all triggered by the re-entry of Beijing into the world textiles market. Yesterday, China was warned of possible retaliatory measures by the European Union.

As the world mobilised to Make Poverty History, nothing was said about how the rich countries might help the vulnerable developing states suffering from the impact of what is known here as the Chinese tsunami. For the impoverished African kingdom of Lesotho, the phenomenon spells disaster. Across southern Africa, hundreds of thousands of people have lost their jobs in textiles.

Ms Tsebo, 37, earned her first job, as a labourer, in 2000 after Taiwan and Chinese investors descended on this dirt-poor town in 1999 to build garment and textile factories. They came in response to Bill Clinton's Africa Growth and Opportunity Act, aimed at lifting sub-Saharan Africa out of its perennial squalor. The countries which lived by the rules, ranging from good governance and respect for human rights, would enjoy unrestricted access to the lucrative US market by exporting textiles and other products duty-free. Lesotho, with its cheap labour, and surrounded by South Africa, became a natural attraction for Asian investors avoiding the textile trade quotas then in force against Asia.

But as a result of last January's expiry of the textile quota system which for decades had restricted cheap Chinese exports to the developed world, coupled with the headlong plunge of the US dollar against the South African rand, US buyers are no longer coming here. Lesotho-based producers can no longer compete with the cheap goods being dumped into the American market by China's powerful clothing sector after it was freed from the quota system. The rand, which has more than doubled in value against the dollar, has equally doubled their costs.

Textiles had become the biggest single employer in Lesotho, accounting for virtually every manufacturing job and the bulk of export receipts here. When the Chinese arrived, Ms Tsebo no longer had to scavenge for food on dumps for her two children, four siblings and unemployed father. Although she could not afford to send her children to school, her income was enough to buy a bag of maize and relish to see the family through to the next pay cheque. Now, she is facing a return to the nightmare of the rubbish dumps.

The dusty town of Maputsoe had begun to acquire a new face as Lesotho's textiles hub. Sewing machines were humming round the clock, stitching T-shirts, fleece sweaters and jeans destined for stores in America: Wal-Mart, JC Penney, Hanes and other big traders. Many of the factories are now silent.

Jennifer Chen, managing director of Shining Century Limited, is among the remaining major textile employers. She says she has just retrenched 300 of her 1,500-strong workforce, because the "orders from America simply aren't coming". She predicts more cutbacks unless politicians in rich countries use their political power to stop Chinese dumping and create a rescue deal for vulnerable countries such as Lesotho. In 2002, Lesotho garment factories had to sell an average of only $50 (£26) to $55 of clothes to the US to cover a single monthly factory wage of 650 rand (£56), Mrs Chen says. They now have to sell an average of $109 to $115 worth of clothes to pay that wage. "And to cap the disaster, orders from America keep getting less and less," she says. "For many of us, it's traumatic. We don't see any hope."

She can produce 700,000 garments for America each month, but her factory output is now down far below that. The Clinton scheme has been rendered meaningless because it now makes more sense for factories to move to China- where labour is even cheaper, and join the dumping bandwagon. Some of the biggest employers just deserted their factories and disappeared, leaving workers stranded without their outstanding wages and job termination benefits. Thabo Mohaleroe, executive director of the Lesotho Textiles Exporters Association, says employers had largely predicted the problems that would be caused by the expiry of the global quota system. But no one had foreseen the "tragic coincidence" of the plunge in the dollar and the surge in the rand, which is directly pegged to the Lesotho currency, the maloti.

South Africa itself has lost more than 30,000 textiles jobs. In Swaziland and Namibia, an estimated three in every four jobs will be lost by the end of June. In Lesotho, where unemployment has reached 40 per cent, the textile job losses are simply unaffordable in a country where textiles account for 90 per cent of all export earnings, Mr Mohaleroe says. The factory closures have had a knock-on effect in other sectors of the economy such as retail, transport, electricity, telecommunications and water. Billy Macaefa, general secretary of Lesotho's Factory Workers Union, is furious because out of those remaining in work, a further 10,000 workers have been put on short term. That means they are called in only as and when their labour is needed and paid for the number of days worked.

But those such as Mathabiso Mabalela, whose husband died and who has to feed six children, have not been called for any short-term duty since January. They have not had any wages either. Mr Macaefa says: "We do appreciate the problems but we feel this short-term business is a criminal abuse of workers. It's a linguistic excuse for them not to fire workers and pay benefits. Survival is virtually impossible for anyone on short term."

Last week, at least 700 workers gathered outside the gates of Kingyang Garments, the latest of the garment factories to close. They had been promised two months' outstanding pay after the factory shut, but found no one except security guards. Puleng Choboakane did not know, or care, about the problems of the US dollar and the expiry of the global quota system which have cost her a job. "All I know is that I am very hungry and I need my pay," she said. David Mpopo, a regional union official who was there to try to help the workers, said: "We have run out of ideas. We have been badly hit by this Chinese tsunami."

Peter Molapi, chief executive of the government-run Lesotho National Development Co-operation, tasked with finding ways of helping the textiles sector, says the Lesotho government is assessing the financial health of remaining firms. It would no longer allow employers to close shop and vanish without paying workers in a country with no social security system. The government says it is trying to help manufacturers save costs by, among other things, cutting rentals for those operating from government premises and deferring income tax. There has been no wage increase in the textile sector for two years. Mr Molapi sees still more job losses. "Realising we may lose this sector, our strategy is on salvaging as much as we can," he said.

Consultations have started with the Bush administration to implement safeguards against Chinese exports to the US. Attempts will be made to diversify to other markets including Canada and Australia though these might bring only small rewards compared to America. Mr Mohaleroe sees no light at the end of the tunnel despite four high-level visits to the US to plead with the Bush administration to stop the "Chinese tsunami" by introducing safeguards. He says the only other source of salvation could be Tony Blair's intervention through his Commission for Africa project. Mr Blair could woo the Bush administration and other rich countries to safeguard imports from poor countries against the unfair Chinese competition.

Mr Macaefa, also a member of Parliament, adds: "The Chinese tsunami has created more poverty by extensive job losses. The best Mr Blair can do is stop it by vigorously campaigning for the opening of EU markets and having a sound chat with Mr [George] Bush." The EU has not been willing to open discussions about textiles imports to Europe, he said. "They have to open up for us. If they want to help us get rid of poverty, then we say to them give us markets, not pounds and euros in loans, accompanied by European experts who draw fat salaries from the same loans."

Manthabiseng Mureki, whose child died after eating a contaminated apple from a dump, seems to have found humour in her suffering since her employers disappeared in January. She has the words "Suffer continue" on her torn T-shirt. Her message is true for thousands of textile workers in southern Africa.

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